Research published by the Prudential last week showed that 2.2m adults were
planning to delay their retirement this year because of the impoverished
state of their pensions.

It wasn’t a rallying cry the baby boomer generation ever expected to make: Help! I can’t afford to retire. But this is the position many find themselves in as a result of the economic crisis.

The problem is twofold: many pension funds have been ravaged by the stock market falls, while those who confidently assumed that their property would subsidise their retirement have had a rude awakening, thanks to tumbling house prices.

At the same time annuity rates continue their inexorable slide downwards, due largely to increased longevity, although declining gilt yields are exacerbating the problem. This week alone, some annuity providers cut their standard rates by as much as 2.5pc.

In 1990, those retiring with a £100,000 pension pot would have been able to buy an income of £15,600 a year. Today, the same pension fund buys less than £7,000 a year. So people now need to save more than twice as much money to secure the same pension income, but in current market conditions amassing a pension fund of this size is a Sisyphean challenge.

As a result many of those who are fast approaching retirement are suddenly aware that their pension fund isn’t really up to the job. This leaves them in the invidious position of either delaying retirement and working longer or accepting a far lower standard of living in retirement.

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Research published by the Prudential last week showed that 2.2m adults were planning to delay their retirement this year because of the impoverished state of their pensions. More than half a million of these workers said that as a result of the current economic circumstances they did not think they would be able to retire before 2012.

More worrying still, a further half a million said they feared they won’t ever be able to retire because they had made inadequate pension plans. The insurer estimates that those retiring this year are getting £2.9bn less in pension income than those retiring the year before.

Billy Burrows, of William Burrows Annuities, said that many people’s retirement plans have been rocked by the on-going financial crisis.

“In a short space of time we have moved from a world where many people benefited from the best economic and financial circumstances in living memory, to a world where many are facing hardship as a result of falling house and share prices,” he said.

As a result, many are delaying retirement plans. But he points out that there are steps that those in this position can take, to improve their pension position (see below for further information).

Just as important, he said, is the plight of many younger baby boomers who are between five and 10 years away from their planned retirement.

Many in this age-group are simply delaying making financial decisions, he said, until the economic situation improves.

“It is human nature to shy away from making decisions about things that appear complex,’’ Mr Burrows said. ‘‘However, many have lost out because they didn’t realise they had choices when it came to pension planning. By doing nothing now they are falling into the same trap, and could be making their situation worse.”

Michael Rudge, the managing director of Hartford Life, the annuity provider, said: “People’s attitudes unfortunately remain firmly fixed in the pre-credit crisis era, whether it is an over-reliance on property, a lack of understanding about pensions, or leaving retirement planning until the last minute. Many people have not adapted to the economic realities of 2009.”

In a report from Hartford Life due to be published next week – After the Crunch: Saving for Retirement – Mr Burrows describes such consumers as “crunch deniers”, although he also points out that there are growing numbers of those who are “crunch drunk” – in other words they realise the recession has had an impact on their retirement plans, but are confused about what to do next.

He said: “These baby boomers need to become ‘crunch conscious’ and take decisive action now in a bid to ensure the best outcome for retirement.”